Louis Moore Bacon Upped Stake in a Snack Food Conglomerate
In this article, let's take a look at Mondelez International, Inc. (MDLZ), a $57.17 billion market cap company, which is a global snack food company.
Louis Moore Bacon (Trades, Portfolio) is an American hedge fund manager and trader who focuses on a global macro strategy to invest in the markets. This strategy focuses on indices, currencies, commodities, and other asset classes based on expectations about specific markets and asset classes. The firm had its second consecutive month of net inflows in May. Although funds for $1.6 billion were added during the month, it was not enough to bring the flows to positive territory considering the entire year.
Bacon has been at the top 20 ranking of Top 100 money earners since the 1990s. He is considered one of the top 100 traders of the 20th century. With an estimated current net worth of around $1.75 billion and he is ranked by Forbes as one of the richest person in the world. He is the manager of a leading New York City-based hedge fund, Moore Capital Management.
The investment guru initiated a stake in the company with 155,000 shares during the fourth quarter of 2014.
It is no surprise that the firm has excellent brands such as Oreo, Cadbury, Nabisco, Trident and Tang. Mondelez is a leader in various markets, such as the chocolate market, the gum or the candy aisle market; and is increasing the portion of others, like the powdered beverage arena. Recently, the company has signed a two-year agreement with MLS to become the league's official snacks partner, and promote its cookie, cracker, candy and gum segments. The firm is now focusing on sports.
"The sport is on the tipping point for exponential growth," said Stephen Chriss, who heads Mondelez's consumer engagement and marketing in North America.
Revenues, Margins and Profitability
Revenue declined by 6.94%, but earnings per share increased in the most recent quarter compared to the samequarter a year ago ($0.29 vs $0.09).
Net income decreased by 71.7% when compared to the same quarter one year ago, from $1,766.00 million to $500.00 million.
Gross profit margin is considered high at about 38. Net margin for the quarter that ended in Dec. 2014 was 5.66%, which is ranked higher than 81% of the 1,712 Companies in the Global Confectioners industry.
Finally, let�s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
Ticker | Company | ROE (%) |
MDLZ | Mondelez | 7.05 |
KRFT | Kraft Foods Group Inc | 20.13 |
GIS | General Mills | 24.03 |
HSY | The Hershey Co | 54.61 |
K | Kellogg Co | 18.61 |
Industry Median | 8.62 |
The company has a current ROE of 7.05% which is lower than the industry median. In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. So for investors looking those levels or more, General Mills Inc (GIS) and Kellogg Co (K) could be the option. Other companies, such as Kraft (KRFT) and The Hershey Co (HSY) have extremely good ratios. It is very important to understand this metric before investing and it is important to look at the trend in ROE over time.
Year | ROE (%) |
Dec05 | 8.85 |
Dec06 | 10.52 |
Dec07 | 9.27 |
Dec08 | 11.65 |
Dec09 | 12.57 |
Dec10 | 13.33 |
Dec11 | 9.93 |
Dec12 | 9.09 |
Dec13 | 12.11 |
Dec14 | 7.27 |
Relative Valuation
In terms of valuation, the stock sells at a trailing P/E of 27.4x, trading at a premium compared to an average of 26.7x for the industry. To use another metric, its price-to-book ratio of 2.1x indicates a premium versus the industry average of 2.08x. These two ratios indicate that the stock is relatively overvalued and subject to a potential sell.
Final Comment
As outlined in the article, Mondelez is betting on sports and we believe is a good strategy and why not, in the future it could implement them in faster-growing emerging markets.
Other hedge fund gurus have been active in the company. Gurus like Paul Tudor Jones (Trades, Portfolio), Jim Simons (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ken Fisher (Trades, Portfolio), George Soros (Trades, Portfolio), John Keeley (Trades, Portfolio) have added this stock to their portfolios in the fourth quarter of 2014, as well as Caxton Associates (Trades, Portfolio), RS Investment Management (Trades, Portfolio) and HOTCHKIS & WILEY.
Disclosure: Omar Venerio holds no position in any stocks mentioned
This article first appeared on GuruFocus.
